Conversations with History: Gary Becker

this program is presented by university of california television like what you learn visit our website or follow us on Facebook and Twitter to keep up with the latest UC TV programs welcome to a conversation with history I'm Harry Kreisler of the Institute of International Studies our distinguished guest today is Gary s Becker who is a university professor in the department of economics and sociology and professor in the Graduate School of Business at the University of Chicago he has the winner of many distinguished awards including in 1967 he won the John Bates Clark medal and in 1992 the Nobel Memorial Prize in Economic Sciences and in 2007 the Presidential Medal of Freedom Professor Becker welcome to Berkeley glad to be here where are we born and raised well I was born in very small coal mining town so Pottsville Pennsylvania so it's not too far from Philadelphia we lived there six or seven years then we moved to New York City and so I went to most of my schooling Elementary School in high school was in Brooklyn New York actually and looking back how did your parents shape your thinking about the world well my parents weren't very educated neither one went past the eighth grade my father though was interested in he was a businessman reasonably successful small businessman and he was interested in world events so we had a lot of discussions in house well not many books in the house but a lot of discussions about politics and things of that type which definitely had an influence of my interest in social political and economic issues and and he was quite an entrepreneurial type even as a young man very much yes I actually his family moved to Montreal when he was six years old when he was 16 years old he left his parents and came to United States on his own start a business I mean imagine that nowadays a 16 year old starting a business on their own was a retail business he's telling me he was ignorant of a lot of things like insurance and so on he didn't know and so for the rest of his life he was in business his own business he basically after that he never worked for anybody else he went into a lot of different businesses in Pennsylvania New Jersey New York State where he wasn't here Niagara Falls originally and then in New York City and what about the influence of your mother was she a party to your great interest in society and the problems of social my mother was a great mother in a sense a very caring and like she she didn't have as the broad interest that my father did in general events so I think I got a lot from my mother but even more intuitive thing she had a very intuitive good in psychological insight into people things of that type and I and I think I inherited some of that and quiet some of it from being around her before you went to college high school teachers any that particularly influenced you to good teachers I mean of others but - I remember at an English teacher where she had loved literature poetry and literature and I wasn't much of it I didn't I was more science oriented type of student but she gave me a feeling of love for literature and poetry and well I can't say I'm a huge reader of you know fiction or poetry anymore but I still have that love for it and so she was great and not a math teacher and he you know it was not a great mathematician but he loved mathematics and I was on the math team and I got on in a funny way but I won't go into that and I did well in the math team then I went to Princeton I did extremely well at Princeton my first I came back at the end of the first year I visit the high school and he asked me what am I going to do and I said I'm going to major in economics but I did you know I came in first my class it wasn't interested I came in first in my class so you're not going to mathematics and I said well economics you yourself mad but then didn't console him so he it was great I mean and those two teachers I think really had an important influence I mean love of the subject matter that's to me what so it makes a great teacher somebody who loves this subject matter and convey that to students those two teachers certainly did that at Princeton you you reinforced your love for mathematics while you chose economics as a professional I sort of did both fields math and any genomics and Princeton has and still has to this day one of the great math departments I took a lot of mathematics including graduate mathematics at Princeton had some great teachers and I didn't know it was going to be that useful in economics but turned out to be but I did it because I really like mathematics economics appealed to me because I felt I could I could do what technical stuff which I thought it would be pretty good at but deal with social problems that's what attracted me I wanted to deal with social problems and this was the way I thought I could I could do it best so combination seemed appealing and and turned out to be I think good choice and I thought what is your thinking about what drew you to social problems was it that in your past you had acquired a sense of of kind of the bigger picture than just narrow technical economic analysis well I I mean my family my high school people are debating that I mean those days are a lot of Communists and I was on the level know I was always anti-communist my father's anti-communist but I certainly would you would say was on on the Left debating all types of Seth problem so I that was conveyed to me as well and I began to be interested in these problems feel I want to do something you know important for the society and when I first started taking economics I almost left it in my my senior year because it changed me it didn't deal with important problems sociology for example did and I tried thing about sociology but I finally decided it was a little too hard in terms of the sociology that I read so I gave it up I did make a serious thinking about switching to sociology but when I went to graduate school still being uneasy that economics didn't deal with social problems I had some teachers several teachers there who showed me that you could use economics as a device to understand social problems and so that that's really where my career went after that and you did your graduate work in Chicago and Chicago and and who did you work with there mainly well the most important influence of my thing was Milton Friedman I mean there's no question about that nor is he sick always been a controversial figure but as a teacher absolutely outstanding teacher absolutely outstanding I mean he mesmerized all the students he was such a great teacher he just in terms of conveying that economics was a powerful tool that wasn't a game you're playing with other intellectuals there was a tool of analysis and I had two other teachers who were important to me TW Schultz who like Friedman won the Nobel Prize eventually he was interested in broader issues development issues and he started out as an agricultural economist got interested in development human capital became a very important economist and then a labor economist Greg Lewis who showed also how in labor economics you can work on important questions and technically he was very good technically so these teachers I think had a big influence on me that's why I always felt maybe I would had equally great teachers I went elsewhere I thought of going to Harvard instead of Chicago at the time but I think I made the right choice and it was a really stimulating department and and what did you do your dissertation on racial discrimination the economics and this would have been what year well I finished my dissertation in 1955 so that's 68 years ago so published a book on it in 1957 so at that time it essentially no work in economics on on racial discrimination I got interested in it and a lot of people thought that's not economics I mean and it wasn't it wasn't for the support of Friedman Schultz and Lewis the three names I've mentioned and maybe some others I might have changed the subject but they said well it's different but it's interesting and they supported me intellectually and and that made a big difference and I went around lecturing to places like Harvard and elsewhere and they were very skeptical MIT whether this was real economics but the support of my teachers made an enormous difference to my willingness to stay with the subject and then eventually it became a you know a very big field because of public policy changes like the Brown versus the Board of Education decision 54 I guess and others you know it's a civil rights movement so on finally economists woke up a little bit so we have this discrimination right in the middle of us not against African Americans women and so on we should be we have a contribution to make to it and and and what exactly did you do in the dissertation you were taking economic analysis and saying well what are the costs what are the what price do we pay for discrimination at all levels when I try to do say well I assume that some people up prejudices against different groups but that their prejudice have to interact with an economic system let's say a market system and a competition for example monopolies and how do their prejudice interact with the forces in the market and I show that just knowing what people's prejudices are aren't anywhere sufficient let us understand how much observed discrimination you see in the marketplace so I developed an analysis of the interaction during people's prejudice or preferences and how markets different types of markets including governmental markets operate to try to get a end result would be how much observed discrimination do we see as say if you have blacks and whites of equal productivity how much less would the blacks be earning for example that's what I tried to do and in other words so it was a different kind of argument a different sort of cut into what was becoming recognized as a universal issue for the country but on moral grounds right exactly exactly yeah it was a different cut it was an analysis now what I you know some people picked it up on some moral issues and well Becker shows that if you have competition you they claim you eliminate discrimination I didn't claim that I said competition can affect and generally reduce the amount of observable discrimination but if people's preferences are strong enough I mean went into a bunch of different issues you still can have it so it said into some of the moral arguments but it was an analysis there are no recommendations in the book it's an analysis of a problem it fed my conviction in general in order to understand what policies we should take you have to first understand how people respond to different things and so in order to understand discrimination and what how we might what buttons we should try to push and say political process we have to understand how the rillette people are going to react then that's where my analysis I think has been useful now is is the beauty of economic analysis that it draws out or it leads to a better understanding of issues that they're out there in essence breaking them down and bringing a clarity that that actually can become a tool for society it choose to act on the issue yeah no I think there's no question that's what economics helps one do economics really in a nutshell it deals with how people respond to incentives and as you change various types in some monetary incentive but non-monetary incentives of all types how people will respond to that other fields deal with that tube that's what certainly economist concentrate on and yeah if you think of you know designing a public policy of some type you're always going to affect people's incentives no matter what you do you have social security retirement and you affect well what age are they going to retire and so on you have disability program and you know what determines of I'm eligible for a disability Earned Income Tax Credit which we have in the United States what determines how much I can get as a tax credit and I'll be a function how much I earn that'll affect with my behavior so all public policies affect incentives as I went hosters is necessary to understand these responses I think before one can intelligently discuss public policy questions before we talk about economic analysis in further I want to detour here for a second because you must have had a lot of self-confidence even as a young scholar a rebellious streak to actually carve out a domain which was in the first instance not by your mentors but by the discipline really dismissed out of hand well we don't do this stuff yeah well it's an interesting question I thought about that a lot I mean are a number of factors that were about the support of people I enormous ly respected that they thought I was doing interesting work if they didn't support me I mean I might have you know felt well I'm really on the wrong track the second thing was it was a certain I know I was always a shy person my particular when I was younger so I wasn't one of these aggressive persons who went out there I was talking about everything they know it was my nature but I had a self-confidence I said look I would tell myself it's so obvious of discriminate discriminations I would talk to myself it's so obvious the discrimination is such an important topic that economists don't see it I mean they eventually they're going to have to see it that's why I tried to convince myself on and that along with the support of a small number of people encouraged me to go on if I didn't have that support I think I would have given up on it so I think the self confidence for me wouldn't have been enough but I did have that self confidence I was willing I had a thick enough skin I was willing to take the criticisms of the establishment you know the Harvard the Chicago the Berkeley the Stanford people who didn't think much of it but here and there there was somebody who wrote it I got some very good favorable reviews of my book professor at Stanford a very good review professor at UCLA wrote a very good review of the book so there were people who who supported me that was enough for me I felt it's going to it's going to be important and they take five years ten years but it will be important I'm curious about Friedman because you know we think I'm as this great conservative intellectual but but you're really saying that as a as a teacher and as a mentor he was somebody who could let a student run with an idea even if he didn't quite yet see all of its implications well Freeman was not a conservative intellectually you know he's and he always would say it was not concer he was a free-market person believed in freedom but intellectually was not a conservative he was open to ideas now he was a tremendous critic and he would knock you down I knocked me down on this subject and a lot of others really hard so he was a tremendous critic but I'll give you one example that to show you was not a conservative but I just it was just the beginning of my topic I wrote three pages out and he was then spending a year in Cambridge England and so I sent it to him and he answered me a month later and two page letter very detailed first page and a half he was telling me everything that was wrong with what I was doing I mean this is not you can't read it the last paragraph he said but you have some good ideas in here you should develop them very early now that both parts affected me that tremendous criticisms I mean I couldn't touch the subject for a couple of weeks after that literally I didn't look at it for a couple of weeks but then I kept saying well but he said there are good ideas and their greed with me so Freeman that was was like that he was not conservative intellectual he was very open intellectually you have to pass a tough barrage of questions and so on but he didn't say well this is not what we do or you know just closes mine to it so that's why he was such a great teacher and people you know people who had very liberal views still found him a great teacher they'd come to him discuss a problem and he'd be very helpful to them this leads me to the question because students watch this program what what looking back at your career what are the skills that really one has to develop if one is going to do important work in economics math obviously you need some technical skills math statistics and so on very important quantitative skills to deal with data and so those important to modern economics more important when I started in the field very important to do important work in any field you have to have a thick skin you can't be so concerned criticism that you differing from everybody else that you immediately you want to just run with the pack and unfortunately that's where most students and most people are they don't want to subject subject themselves to intense criticism to be laughed at which I was at a number of occasions so a lot of people develop that I don't know how people develop that but I think that's important to do and if you hit on something to have confident if you are confident in it to try to push it further and because the professions are always often wrong about things I mean the elders in a field that they've learned some material so they clearly have an interest in preserving that I don't blame them you saw you have to fight you have to fight to overthrow those ideas but so you be got to be willing to fight so technical skills are unnecessary but it's not sufficient to do important work I think you need this other aspect which you know it's called originality but it partly in good Parkins it is is a toughness an intellectual toughness you're willing to take the heat from people and that I've read biographies of people in signs and so on who have done great work notice how usually their ideas were not well received that a fight for them but they were confident and their ideas are students but tell students about what field you're in yeah I get the technical training necessary for your field but that's not going to be sufficient to do a major work you have to have the ideas but you also have the confidence to see those ideas through even if a lot of people people you respect sometimes don't think they're worth that much so so what are the building blocks for the obtaining the vision to see alternative paths I mean that must be key in creativity I want to go there even if the disciplines not there I was very tough I mean it was a lot of literature written on creativity but most of it you read it it's not a toolbox to learn how to be creative I wish I knew what it what it takes to be you know people have said well thorn Singh Veblen said well he was he was fortunate because he grew up feeling marginal in society society and so therefore he looked at things more objectively and maybe there's something to to that I don't know you know people like Isaac Newton and Albert Einstein felt particularly marginal for society so I'm not sure how applicable it is to some of the Charles Darwin some of the really great achievers in in different fields but I would probably confess I don't know the answer to that question not easy but I do know one important ingredient is a willingness to go against the grain that I do know now you can go against the grain and have a stupid idea to I mean you know the most ideas are wrong then you gather you got to recognize that research is a risky activity you important secret is know when to abandon the bad ideas and to pursue the good ideas are a lot of people out there a lot have lots of ideas they don't know which ones to pursue and all end up pursuing bad ideas now what determines whether you pick the good things to pursue I mean I I confess I don't know the answer to that question now you are at Chicago and one of the most important schools of economic thinking is it Chicago the Chicago School and when did when did the Chicago School emerge what was it already in existence when you were a graduate student there or did it develop over time because I think it's important to understand how the building blocks are put in place because there must be support in a community of scholars when when you're you're carving out these innovative paths and in creating a kind of an intellectual powerhouse community like Chicago well she it was there when I came but one thing one has to understand about the Chicago School it's evolved has not been a single message or a single point of year so I would say it started probably in the late 1920s when to braid economist Kent Kane came to Chicago by the name of Frank Knight in Jacob Viner who people who would have won two Nobel prizes they had a Nobel Prize for economics in those days they were really both outstanding and major figures in the history of economic thought of the 20th century they started it and and there are other members of the school that I named Milton Friedman came and he had an enormous influence on what went on the monetarism that he was famous for the free market view had really preceded him but he because Viner night henry Simon's other major figures had already been promoters of free market ideas but Friedman certainly pushed them further and deeper in many respects and the predecessors and pushed it in other direction like monitor it monetary sort of activities and then evolved say my my work and others and pushing economics into other areas became part of the so-called Chicago School and that became part of the Chicago School so it's been an evolving system of thought not a static system of thought usually belief in private sector has been part of it at all in all its manifestations but it's had a lot of other components of and yes people in the outside what's the chicago school they might mention 10 different things of chicago school what it did have and and and speaking to your point about there's a community of scholars what it did have in that dimension which I always thought was really crucial that everybody believed in economics that economics was a powerful tool they may have gone in different directions like Bob Hope did economic history slavery and the like but he used economic tools so he could communicate with us and found we found his work very interesting and exciting other people went into macroeconomics extended what the work Milton Friedman did other people went into labor economics agricultural economics development economics but they only had confidence that economics tools were valuable and understanding the reality of the world that they were talking about an ultimate valuable for public policy issues and there's anything single thing that held the school together more than anything else then political views not everybody believed in free market and certainly everybody was conservative for example a lot of people weren't but they all were confident in economics as a tool of analysis and I think that confidence enabled us to have a community because nowadays a lot of feels like you could get so technical you have yeah mathematically economists here and academic trician seer and quantitative people here and so on but we had a community I felt a good econ should be able to talk to all everybody and that's what everybody that's your card with all the time and that's more than anything else I think what made the Chicago School a community of scholars who had conflict and so on but Haddix common believes everything without that common believes you really can't have a community of scholars so so it was a continuing conversation and but it was a conversation that in the end one could get feedback that was critical so even among your established colleagues people would say well it doesn't sound like a good idea to me but but kind of a continuing exchange shigar was known economics at Chicago known for really tough seminars and so on workshops and seminars workshops what we call the works at the start of the universe in the Department of Economics University of Chicago and the seminars are really tough so people say everybody Chicago thinks the same just attend a seminar Chicago and you'll find that that was never true my day wasn't true a lot of tough arguments people stopped talking to each other yet they still had this common belief they almost died but they went at different ways of looking at it and so the interactions were enormous and that meant a lot of conflict intellectual calm you know and academics can are sensitive a lot and so some of them got really hurt and didn't talk to each other but it was a lot of conflict so it was a common belief that these principles were important how you met you implement these principles to discuss interesting issues people had a lot of different views about that and that which made the seminars we had so exciting that people we you know we got a speaker in the Pete would say something and then the arguments would be among the audience not a speaker sometimes I when I run these salmon I would tell this because look you're only a catalyst here and a few of you arguing back and what Biggers Danny they're trying to get a word in so I think that was important and and is this are these the characteristics of Chicago generally in other departments too or are you just addressing economics yeah well I don't know every department it was a characteristic and still is for some of the departments I was associated with or had some knowledge about like the law school for and still is at the law school sociology apartment certainly was when I was active in and I'm less active in sociology you know certainly in the business goes very much very much so these parts of the social sciences that I know and some linka we I run a long time I've run a seminar on what's called rational choice in social sciences sadly with a outstanding sociologist name was James Coleman and had he died unfortunately I had several other partners now I have Richard Posner a famous judge and legal scholar and we get people from all parts of Social Sciences and we have the same type of atmosphere there that we have in what I mentioned in economics and so in that sense I wouldn't say it's true in every department but the departments that interact in these sorts of areas definitely is still true it you help our audience understand what rational choice is because there's a lot of confusion about it but in a way it's a simple idea yeah very simple idea I mean I mean in the simplest way to put what rational choice is that people you know consider alternatives and they make a decision given what limited resources they have and their preferences that make them as much as they can anticipate given the uncertainty well as well off as possible that's what rational choice theory in his very simplest framework is now the challenge in making a theory useful is to take that simple idea and I think very fundamental idea and put it in the context so you can actually derive implication about it about behavior and even public policy but if you want to know what the basis of rational choice is is that simple I like to give the example from the area of the family where I've worked a lot on I say well what are we saying and what we're saying is very common sense II that people choose a mate to match or marry because they think that person is going to make them happy or better than they would be with anybody else that they have available now and they and they get divorced because they conclude that they can find maybe that abeam being single I'm marrying somebody else as I'm happy that's that's what it that's simply what it's saying now it when put in a an analytical framework it has implications so it goes beyond common sense and gets implicated beyond comes on but the fundamentals of rational choices I think is attractive to people and often people say I explained it to somebody not against that but that's so obvious well it is obvious at one level the other level is when you make it into a tool of analysis it at least your implication that often aren't that obvious and and and the key here is not to let that analysis prevent you from broadening your understanding of all the other forces that are work so it's not just those rational choices but also the broader context which are impacting those choices you put that in you know the advantage of this framework is it can you can take this framework and apply to a lot of different problems interacting with public policy with institutions and so on and get a whole system a worldview even out of it I think that's the great advantage gives you tremendous scope now that doesn't mean it's a magic wand that you can wave and understand every problem in the world I wish that were true most are problems I would say we don't understand these economists for sure don't understand and I certainly don't understand but it's a powerful tool that enables you at least to think about a lot of different problems a tremendous variety where other forces at work like Fogle's work on slavery for example that's what photo was doing his work on slavery the the rational choice and in the thinking of the at the Chicago School that we've talked about it comes to conclusions about the virtues of markets in comparison with the virtue of government talk a little about that because the school is associated with the idea that that free markets work best in ensuring the welfare of the general good well rational choice analysis doesn't necessarily mean you'll end up with believing in free markets you have rational choice analysis and say well let's say you take the issue of global warming that you know companies are rational and so on but they were over polluting and so you're not leading to the optimal you have to have some some controls over pollution so but it does it does on the other hand lead you to believe that there are a lot of virtues in competition and so on which is another foundation of much of economics that you know when you have competition whether it's among auto companies or high-tech companies or or educational institutions like higher education United States competition brings out good things that the because people are behaving firms are behaving rationally in a sense I described it and they're going to strive to improve their productivity and the like I don't think there's any magic in why the US has the best higher education system I think what they're crucial ingredients are we have such a highly competitive it's a set of universities and colleges private and public that are competing very hard for faculty students for funding and the like and I think that's brought out the best in the higher education United States so it doesn't always lead to free markets but certainly there is some some tendency if you if you believe in rational choice and in a sense that you're going to have sympathy to competition and markets in in many situations I think that is definitely true and that certainly has been true and one of the distinguishing features of Chicago economic thought and again not everybody at Chicago but what is best known about Chicago and and what what are the the flaws in government and regulation in comparison to the market what what what what would it what is the the problem there yeah well obviously we need government to for various issues that the markets can't handle issues like defense crime infrastructure various type for providing a flaw for the very unfortunate so market can't handle those problems and you need government but the problem with government and why I tend to believe in small government is that you you have very imperfect competition in government yes we have elections but it's it's a much blunt or instrument than the elections kind of elections we have in the private sector where consumers are voting with their feet they don't like the product they go someplace else and people can enter in you have a entry and exit of a lot of different companies and most industries you don't have that in the political sector and so the second issue you don't that's a problem to plug your sector you have interest groups that greatly influence a political outcome so you have the oil companies who don't want carbon taxes for example and so they're very powerful in the Washington debate on this you have education institutions that are pushing for more subsidies for higher education and so they're an interest group as well so it's buffeted by interest groups and the powerful interest groups will get their way and you have much less of that when you go to a market system so I think there are some really fundamental defects in government government is necessary you couldn't have a humane or a productive society without government on the other hand when government overreaches which I think it often does I think you get less desirable outcomes let's apply this analysis to understanding the the 2008 global economic crisis so talk a little about the the factors that led to the crisis and in is this a case of a failure of the market or a failure of government regulation or both both I would say and let me try to explain why I would say there are three major factors that contributed to the crisis one bad policies by the Federal Reserve which I will treat as government I mean it's nominally independent but it's basically a government institution excessively low interest rates through two thousand four or five six seven that encouraged increase in asset values and borrowing and so on I think that was one important factor the second important factor was a very bad regulatory and governmental activity Fannie Mae and Freddie Mac who were supporting a lot of highly risky loans even when people wanting them that is risky regulators who overlooked some of the excesses in the private sector and third was the private sector in in the financial sector who were taking on risk that they were greatly under estimating the magnitude of the risks they were taking on because of imperfect models and perfect understanding I think including an imperfect understand by academics of the what we call systemic or aggregate risk in the economy that was being created even though we had derivatives and modern tool that was supposed to help us handle risk these tools were not effective when everybody was shot kind of doing something similar I mean that's a crude way of putting it so these are three forces not necessarily in order importance in the market I'm not not going to say the market wasn't significant factor failures in the market in this area but there was also failure of government a significant failure government I think if you didn't have failure of government you wouldn't have had the crisis you didn't have failure of the market you wouldn't to add the crisis the combination really made it severe crisis and what about then compare the the response to the crisis and the kind of government policies we got and and whatever capacity was for the market to correct itself well I think some of the early responses were important by the Federal Reserve and so on making money more loosely available it was called QE 1 giving banks excess reserves when we had the crisis in 2008 September 2008 when Lehman Brothers was allowed to go on for a short period of time risk measures of risk went through the roof and fed I think in and the federal government helped help with that so I think the government was important in in the early stages I think ultimately however there was government made some serious mistakes I think the stimulus package to my reading of the evidence has still a lot of controversy among economists on this was a failure as a billion close to a trillion dollars as a failure a lot of the other spending I think was a increase in spending was a failure the qe2 and qe3 I'd have to be convinced I was effective so I think government was essential in responding to the crisis and I think you can criticize some of it but I think on the whole it was the responses were good I think however some of them went too far and I think some of the Fed policies and my judgment went too far though there's a lot of controversy over that and maybe I'm open easily to the view that maybe I'm wrong about that but that's that's how I would interpret the responses so far how does economic analysis make a difference in in policy how does it affect policy I know that that in in the latter part of your career you have really focused on writing for Business Week a column for many years and now a bra of a blog with Professor Posner you know in the Chicago Law School do do ideas matter you must believe that and and in theory can affect practice but but what is your thinking about how that comes about well I don't think it's easy I know question I believe ideas matter and that to understand how policies will work make a difference and suggestions for new policies on the other hand I felt for a long time that just because one has a good you can point out some flaws in a particular policy and have reasonable suggestions about how to change it but policies will change quickly because as I mentioned earlier a lot of special interests with most of the policies we get are not there by accident they're there because some people want these policies now that may not be contributing to the general welfare but certainly will be contributing through welfare the particular groups that are wanting it and and therefore when you come up with changing those spouses you have to fight against those interest groups and often the political parties both parties are dependent on on those injured not willing to make that fight so my view of ideas and public policy is ideas matter but you have to be patient sometimes takes a long time look the I wrote a paper a you're gonna examine my own experience in 1957 I spent a summer at RAND Corporation down in Santa Monica I wrote a paper case against the draft saying we should go to an oil voluntary army ran didn't like it because they were then entirely supported by the Air Force who were getting a lot of people who avoiding the draft I am listening in the airforce they didn't want to publish it as part of their publication and I looked at and I said I think I'm right but never going to see this in reality so I put it in the drawer 20 years less than 20 years later as a result of Vietnam war and a great opposition to the draft that sent it here at Berkeley but a great opposition to the draft President Nixon set up a committee on conserving the voluntary army big battles in that commission Milton Friedman was a hero of that commission and they finally voted to go to a voluntary army and Nixon then eliminated the draft and there's been very little incentive in the United States since and our pressure to go back so I was wrong it took a while but didn't tell you I thought it would never happen it did happen so what I think is true when you think about policy and ideas people may have good ideas about particular subject and and that will change policy in the positive direction when those ideas will be implemented will depend a lot on the circumstances that arise when the regular system is running into more and more difficulties like the regulation of the airlines or trucking in the 70s that ran into a lot of difficulty it was kind of more and more inefficient and eventually Carter President Carter really did away with it there was not a Republican as a Democrat who did away with it I'm partly under the pressure some economists to be sure but other people as well so ideas get implemented politically and circumstances changed when the old pressure groups begin to lose power because they're causing too much disruption and losses in the system that's my view of the how ideas operate and influence policy and this really helps us understand the the influence of the Chicago School in a way because in other words a lot of ideas being generated but it was only when the general political situation changed when there was stagnation and so on which opened up the opportunity for the ideas being seized absolutely a lot of the Chicago ideas got implemented finally but it took a while but the opportunities changed and then people seized on and they said these are so the value of ideas you have an idea out there things get bad it's our security or whatever it may be and then some people see politicians as the a think tank Sears so on well here's this idea it seems pretty reasonable now that we're facing this problem that's when I think they have began to have their influence you you've contributed greatly to the old journalism you wrote a column for Newsweek for many years now you're part of the New Journalism and I'm curious what your thoughts are on the communication revolution and the extent to which because markets really are about information right and and disciplining individual choices as they acquire more and more what is your perspective on the implications of this revolution in in communication both in terms of the response to your blog but also the way arguments that previously between you and Posner might have been in a seminar which thirty people were attending but but now on the Internet well I think in has been and will continue to be an enormous revolution in communication and many other many other things but certainly in communication internet is like a huge market compared to the market out there a lot of bad ideas or stupid ideas competing against you know good ideas and so on people discussing it and and people are informal and they're calling these guys idiots and curse words and so on y'know really it's like a bizarre a free-for-all bizarre I think it's great and you know you can go crazy following things on the Internet and I I don't read that many blogs to tell you the truth but I do a research on the internet and so on but I think is RIT's just changing enormous lis the nature of communication now there are some downsides to it the great value of the great newspapers the New York Times of Wall Street Journal the Financial Times and Washington Post and so on was they you know they stood behind a product and they weren't always right by any means and they had points of view we we may disagree with but they stood behind a product they did investigative journalism they came up with very interesting things a time the Internet is still searching to see if they can find that kind of you know certification of the product and will get it I think we'll get it on the Internet maybe it'll be some conglomerate of different blogs that somebody will be you know gain a reputation that the people writing facin not talking nonsense and so on but that's what the internet is still searching for but I think it's been an enormous li+ revolution it's impossible nowadays for people to be as ignorant of the world as they were in the Soviet Union the Soviet Union basically blocked almost all contact with the outside world you can't do that in China even North Korea I don't know North Korea that well but it's difficult for North Korea to block it and that's because of the internet I mean and I think you know you go to China and you talk to people there in the censor oh yeah the censorship they say but we have a piece of software I remember one graduate student and we have a piece of software made by an American company which we put put into our computers and soil no no we can bypass and go through Hong Kong well I mean you know the government senses in the Chinese government keep trying to our in Iran or any other countries a century I'll try to overcome that but the Internet is too smart they'll find out the way so I think that I think that's been a tremendous revolution in communication one of the bum raps maybe that the Chicago School gets was is that when you look at some of the the major difficulties in our society poverty crime whatever that that in other words you the argument is made well you need to to to have government intervene to solve these problem and that the the assumptions of the chicago school lead to to a more hands-off approach is that a fair criticism and and how do you respond to that well it's not a fair criticism i mean in general because the chicago school and not an artist they believe that government has important role i mentioned a few important aspects before crying for sure you need you need the government poverty it certainly isn't an important role of government on the other hand and this is where the the chicago school maybe take a different view the schiavo school says well if you give people too much incentive not to work they won't work and that's not good for them psychologically but certainly not good for them from that for the economy so the chicago school says yes government can be important and a safety net but you have to be careful how you do that because poor people because they're poor doesn't mean they're stupid that they can't don't respond to incentives I think the chicago school or I'll speak for myself my thinking but I think also a Milton Friedman gives poor people more credit and a lot of people who take a different point of view they say well they know that you know we may not know about punishment of crying but you ask somebody who's living in a area with a lot of crime they know but better than we know what it is and they know you know what they have to do to be able to get a payment for something else heat you got to design a program helping poverty people of poor that takes account of the fact that they're going to respond to that in various ways that doesn't mean you don't want to do anything but it means you may want to do something and the other point the Chicago School is the best cure for poverty overall is economic growth in you and therefore you can promote economic growth in society you will end a lot of poverty so China take two or three hundred million people out of poverty not because the government did anything very sensible is because the government took its hands off of the private sector let the private sector boom and that's where you got most of the boom in China in the private sector and similarly for India when it started its reform in 1991 so economic growth is a powerful poverty cure not perfect so there'll be people fall through the crack you may have to want to help these people I agree but if you ask what's the best approach to poverty I say you promote economic growth in different parts of the world particularly there's real poverty and you'll see a great reduction amount to poverty one final question how would you advise students to prepare for the future reflecting back on on your career whether they want to do economics or or policy or whatever well I say there were two ingredients in choosing what to do if you're a student I was just speaking to my grandson and I was telling him this two ingredients I say a lot of good colleges to go to in the United States people say they have to get into Berkeley they have to get into Chicago you have now a lot of good places to study but doing readings you should do something you like and should do something you're good at and if you can find something that combines those two fields that's the greatest predictor that you're going to be not satisfied and pretty successful at the field so I don't have any specific advice I don't care you know they go into economics they go into literature but those are two criteria I think are important and that's the main advice I would give it I don't try to predict what fields are going to be significant in the future that futurologists do that but if people pick things they like and pick things they're good at I think they're very likely to be satisfied ultimately with what they are doing in their life well on that note professor Becker I want to thank you very much for taking this time to be on our program and reflect on your extraordinary career thank you very much thank you and thank you very much for joining us for this conversation with history

Channel: University of California Television (UCTV)

Views: 19,434

Rating: 4.8504672 out of 5

Keywords: Gary S. Becker, economics, government

Id: dCYHihd1Liw

Length: 58min 8sec (3488 seconds)

Published: Thu May 02 2013